Financials

Signet Exceeds Expectations With a Strong Q3

FinancialsDec 05, 2019

Signet Exceeds Expectations With a Strong Q3

Same-store sales rose at all U.S. mall-based banners while online sales posted double-digit growth.

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Signet Jewelers-owned Piercing Pagoda posted its sixth consecutive quarter of double-digit growth in Q3, with same-store sales rising 12 percent.

Akron, Ohio—Signet Jewelers Ltd. exceeded expectations in the third quarter, as comps rose at all U.S. mall-based banners and online sales posted double-digit growth.

In the third quarter ended Nov. 2, Signet’s same-store sales rose 2.1 percent year-over-year.

E-commerce sales were up 11 percent to $139.9 million, and accounted for 12 percent of total sales, up from 11 percent a year ago.

Brick-and-mortar same-store sales grew 1 percent.

Total sales reached $1.19 billion, essentially flat year-over-year on a both a reported and constant-currency basis.

Signet also reported a smaller-than-expected loss in the quarter, $43.7 million, causing its shares to rise 8 percent in pre-market trading.

It was the retailer’s North American chains—particularly Piercing Pagoda—and online sales that drove the increase while U.K. stores struggled due to Brexit, with comps dropping 5 percent, executives said on Thursday morning’s earnings call.

North America same-store sales were up 3 percent in the quarter. Average transaction value inched up 1 percent while the number of transactions increased 3 percent.

Kay and Jared stores held a lot of clearance sales in the third quarter, which ultimately impacted gross margin, though Chief Financial Officer Joan Hilson noted on the call, “Underneath that, we are pleased by the performance of new product.”

Signet’s total GAAP gross margin was $367.7 million, or 31 percent of sales, down 20 basis points year-over-year.

The retailer’s top performer in the third quarter was James Allen, which posted a 16 percent sales increase, followed by Piercing Pagoda at 12 percent.

CEO Gina Drosos said Q3 marked Piercing Pagoda’s sixth consecutive quarter of double-digit growth.

In addition, the ear piercing chain opened 11 new kiosks in “top-performing malls” in the period and launched its first advertising campaign.

Kay Jewelers saw same-store sales increase 4 percent, with the “Center of Me” collection, a line of Hallmark-branded jewelry, and Adrianna Papell bridal among the top sellers.

Comps at Zales were up 3 percent, due in part to the new Marilyn Monroe collection as well as the Disney-licensed “Frozen 2” and “Maleficent” lines.

Jared the Galleria of Jewelry (down 3 percent), Canadian chain Peoples (down 4 percent) and regional banners (down 16 percent) all posted same-store sales declines.

On Thursday’s call, Drosos said Signet has improved the effectiveness of its advertising spend, particularly by using data analytics to target customers online, and adopted a “mobile-first” approach to online advertising.

RELATED CONTENT: Mobile Shopping Emerges as an Early Holiday Winner

She

said the company launched its holiday marketing in the third quarter in order to begin driving awareness earlier.

Drosos also mentioned Signet’s efforts to improve the in-store experience and focus on services, which she called “an important part of our long-term strategy.”

Following a limited test run, Signet is now doing ear piercing in more than 400 Kay Jewelers stores.

It’s also ramping up its repair business across all banners.

Drosos said this coming weekend, the retailer is holding “Get Your Sparkle On” events in Kay, Jared and Zales stores. Customers are given a free jewelry cleaning and 10 percent off repair services.

Despite a relatively strong Q3, Signet still expects to post a same-store sales decline for the fiscal year of 1 to 2 percent, with total sales of $6.01 billion to $6.05 billion.

“Our financial guidance embeds the progress we have seen year to date balanced with our expectation for a competitive retail holiday environment,” as well as a shorter holiday season and continued impact from Brexit in the U.K., Drosos said.

As announced earlier this year, Signet will close 150 stores this fiscal year and open 35. Counted among the openings are some mall stores that are being moved to off-mall locations.

Net selling square footage will decline about 3 percent as a result of the closures.

The retailer said Thursday that it has closed 86 stores in the fiscal year to date.

Since FY 2018, Signet has reduced the size of its store base by 12 percent. Its store count as of Nov. 2 stands at 3,274: 2,813 locations in North America and 461 in the U.K.

The retailer is exiting failing malls and “simplifying its portfolio” by eliminating most of its regional banners, stores like JB Robinson Jewelers, Belden Jewelers and Gordon’s Jewelers.
Michelle Graffis the editor-in-chief at National Jeweler, directing the publication’s coverage both online and in print.

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